How Mining Pool Rewards Work?

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Every mining pool is different in regard to the ways through which it rewards its members. It is best to choose a mining pool that will best fit your preferences. However, such a task could be challenging, especially in a case where you do not know much about the bitcoin industry. You do not only consider the amount of fee you pay to participate in the pool but also its size and payout methods. Additionally, the rewards received from the pool matter a lot in choosing the best pool.

How the rewards work

Before we outline how the rewarding work, here is some information that you need to know. This will help you understand the rewards system better. Regardless of the cryptocurrency that you mine, each of the pools will have a way of rewarding you. Such ways are established by the pool’s founders. Therefore, if you have worked with a certain pool in the past, you should not expect that another pool would work in a similar manner. Before deciding to work with a mining pool, it is best to ensure that you fully understand how it operates. In our case, we only deal with bitcoins and uses some of the common reward methods in the market. The pool members are rewarded in regard to the accepted shares, that played a role in looking for a new coin. The share is only used as an accounting way of ensuring that the reward system is fair since it does not have any value. A pool member might expect to have all their shares accepted. However, this is not the case since some of the shares might be rejected. The rejection of shares in the mining industry is inevitable, and therefore, you have to be prepared for this. The rejected shares are a representation of the activity that never contributed to mining a new coin, and therefore, one does not get paid for them. In the case where an individual’s computer does a task and makes a late submission for the specific block, then such shares are counted as part of the rejected shares.

Common reward structures

The rewards allocated using these methods depends on the user’s number of accepted shares.

  • Pay-per share (PPS): this is one of the most common methods used by pools in rewarding their members. This method allows members to instantly withdraw their money from the pool’s balance. The best part about this method is that the participant can make as many earnings as possible and be able to withdraw them instantly. It is contrary to other methods that have specific payment periods.
  • Proportional (PROP): in this reward structure, members are offered a reward at the end of the mining period. The reward is proportional to the participant’s shares with respect to the total number of shares that they have in the pool. Additionally, the reward is based on accepted shares only.
  • Shared Maximum Pay Per Share (SMPPS): According to this method, members are allowed to withdraw their earning instantly. However, the payout is limited to the maximum earnings that the pool has made.
  • ESMPPS (Equalized Shared Maximum Pay Per Share): This method uses the same concept as the SMPPS. The only difference is that the payments are distributed equally to all the pool participants.

Other methods include:

  • BPM (Bitcoin Pooled Mining)
  • RSMPPS (Recent Shared Maximum Pay Per Share)
  • DGM (Double Geometric Method)
  • CPPSRB (Capped Pay Per Share with recent backpay)

Therefore, before an individual decides to join a mining pool, it is advisable to consider the pool’s payment structure and any fees that might be charged. In most cases, pools charge approximately 1% to 3%.

The facts about mining pools

The mining industry has become one of the most popular ventures in the market. Various high-speed devices are compatible with personal computers, and therefore, this makes it difficult for an individual to earn much on their own. Personal mining assures an individual of high profits with a low probability. Hence, to increase the probability of earning, it is best to work with a mining pool. However, the profits would be lower as compared to those that an individual could earn working on their own.

Given that payouts are based on when blocks are found, an individual can be lucky to get a huge payment. The opposite is also true; one can get very little payments within a particular block.

Most miners prefer looking for large pools so that they can still get paid regularly under the PPLNS plan. The PPLNS stands for Pay Per Last “N” share, where the last can be replaced by luck. Hence this becomes one of the most favourable methods of payment for most miners.

Choosing the right reward structure

Most miners are unaware of the best reward method when it comes to the bitcoin industry. Each of the payment methods has its pros and cons, and therefore, we cannot conclude that a specific structure is the best. The secret to earning better is staying in the same pool for a long period. Staying in the same pool for long has proven to be the best option for PPLNS because the chances of being lucky are high. As well, the mining pool would reward its participants for their loyalty, using the PPLNS method. Therefore, all you need to do is get professional help on choosing the right mining pool and, in turn, stick to it for a long time. Switching pools within a short period have been found to be an unfavourable method of mining bitcoins. Additionally, if your aim of joining the bitcoin industry is to have a steady daily income, then it is best to choose a pool that uses the PPS method of payment. You might need to sell your rewards, and the PPS method provides you with such an opportunity. The method is conducive for big pools that have the necessary data to understand their mining power. As well, PPLNS promises more profits and regular payments. The method is mostly used by people who have a lot of experience in the mining industry.

The idea of investing in Bitcoin mining can be hazardous, and therefore, an individual should seek professional help before venturing into this business. You can always look at the pool’s payouts section to determine whether their payout method favours your preferences. Additionally, one should feel free to contact the support team to get any clarifications that they need to venture into the bitcoin industry.

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Disclaimer: The information provided on this blog is for informational purposes only and should not be taken as any form of advice.

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